The £30bn (€33bn) Brunel Pension Partnership has issued a call for expressions of interest for its new £1.5bn multi-asset credit (MAC) sub-fund and has released an invitation to tender for its £1.2bn sterling corporate bond fund.
The MAC portfolio will invest in several specialist bond sectors, such as high yield corporate bonds, bank loans, asset-backed securities and emerging market debt, the investment pool announced.
The plan is to gain exposure to a range of more specialised, higher-yielding bond investments that collectively provide a diversifying, moderately high-return portfolio, it added.
Brunel expects to spread the MAC portfolio between managers with diverse and complementary approaches. “We look forward to seeing how managers align their submissions with Brunel’s climate change policy,” it added.
The deadline for receipt of expressions of interest for the MAC fund is 11am UK time on Tuesday 1 September 2020. Prospective managers should contact Brunel via email (MAC@brunelpp.org) for further information and a submission template.
Daniel Spencer, senior investment officer at Brunel, said: “Multi-asset credit provides an exciting opportunity for our clients to gain access to sub-investment grade credit in a diversified and understandable manner, with strong ESG integration.”
He said the strategy will be highly differentiated from Brunel’s other portfolio offerings, “providing our clients with an opportunity to reduce risk whilst maintaining reasonable levels of expected return through use of diversified credit”.
“The multi-asset credit fund enables us to offer something different,” said Liz Woodyard, investments manager at Avon Pension fund, one of 10 Brunel partner schemes.
“Broadening our asset allocation capabilities has potential benefits from both a diversification and an investment performance perspective,” she said.
The MAC fund aims to gain exposure to a diversified portfolio of enhanced credit opportunities with modest-to-low exposure to interest rate risk.
The performance objective is to outperform SONIA (Sterling Overnight Index Average) by +4-5% over a rolling three to five-year period. Selective exposure to investment grade corporate bonds will be permitted, the pool announced.
The sub-fund will be delivered through the ACS platform Brunel has developed in conjunction with FundRock. The formal launch is scheduled for Q1 2021.
Investment consultancy Mercer is assisting Brunel throughout the process.
As for the corporate bond fund, it will invest primarily in sterling-denominated bonds, following the iBoxx Sterling Non-Gilt All-Maturities Bond index.
Brunel PP said the strategy’s aim is to gain exposure to sterling bond markets and the credit risk premium, and its exposure is expected to include securitised debt and some off-benchmark bonds – such as unrated bonds, high yield bonds and non-sterling bonds – in order to enhance returns.
The £1.2bn corporate bond portfolio will be delivered through the ACS platform Brunel has developed in conjunction with FundRock. The formal launch is scheduled for Q1 2021.
The pool will consider both active and buy-and-maintain approaches and individual managers may submit up to two tenders as appropriate.
Stephanie Carter, senior investment officer at Brunel, said: “From the tender process, we will be looking for evidence of strong credit analysis, considered portfolio construction and robust ESG integration.”
The pool stated that while proposed strategies should align with its performance expectations of 1% excess returns (net) relative to the benchmark, “we may consider buy-and-maintain submissions with alternative outperformance targets, given such strategies are not managed relative to benchmarks.”
Brunel will not, however, consider quantitative approaches.
The deadline for receipt of tenders for the corporate bond strategy is 11am UK time on Monday 17 August 2020. Prospective managers should contact Brunel at email@example.com to receive the briefing document and a submission template.
Consultancies Mercer and Inalytics are assisting Brunel throughought the tender process for the corporate bond fund.